(Updated at 10:45 am Friday to reflect that Gateway Bank did open additional locations.)
Think about everything you spend money on in a month. There’s housing, utilities, groceries, transportation, a night out with friends here and there.
Now imagine paying for all of those things without using a debit card or check.
That would put you among the ranks of the unbanked. In 2012, the term applied to 10 percent of the population in the St. Louis metro area. Local groups want to get 20,000 of them a bank account by the middle of 2015.
Unbanked – Households that do not have a checking or savings account at an institution ensured by the Federal Deposit Insurance Corporation.
Underbanked – Households that have a checking or savings account, but still use alternative financial services, either by choice or by necessity.
Alternative financial services – Services that are not backed by an insured institution, such check cashing, money orders or payday loans.
By the Numbers:
A 2006 law required the Federal Deposit Insurance Corporation to begin a bi-annual survey asking banks what efforts they were making to encourage households without traditional bank accounts to open such accounts.
Here are some of the major findings from the first required report, released in December 2009:
- Nationally, 7.7 percent of homes were unbanked. Another 18 percent of households were underbanked.
- Missouri 's rate was above the national average. 204,000 households, or 8.2 percent, had no checking or savings account. The vast majority of the unbanked in the state were black, and made less than $15,000 a year.
- The St. Louis region was actually slightly below the national average, with an unbanked rate of 7.6 percent. Again, the majority of households were black and made less than $15,000 a year.
This is what the picture looked like when the FDIC released its second report in September 2012:
- The national unbanked rate had gone up to 8.2 percent, with another 20 percent underbanked.
- Missouri remained above the national average, with 9.5 percent of its population unbanked. As had been the case two years before, most of the households were black and very low-income.
- The St. Louis region jumped above the state and national averages, with an unbanked rate of 9.7 percent. However, the FDIC did not consider that a statistically significant increase.
The FDIC surveyed the entire St. Louis metropolitan statistical area – nine counties on the Missouri side of the Mississippi River, and another eight counties on the Illinois side. The St. Louis Unbanked Regional Task Force broke down the numbers further, and found that in 2009, nearly 14 percent of the households in the city of St. Louis were unbanked. That number was well above the national average. Alex Fennoy, a task force co-chair, said the city was among the worst when it came to people of color.
The total number of unbanked was smaller in the county – 5.5 percent, or about 22,000 total households.
The survey found two primary reasons that households did not open a bank account: They felt they didn't need one or they didn't have enough money to open one.
Past, Present and Future of a Black-Owned Bank
This is the story of the first black-owned bank in Missouri. It's the thread that connects one "financial desert" to another."
Back in the 1960s, access to financial services, like everything else, was severely limited for African-Americans. So a group of black civic leaders decided to secure a charter to a bank that would be owned by African-Americans to serve African-Americans. The result of their efforts was the Gateway National Bank, which opened in 1965 and remained in the neighborhood for nearly 50 years.
The bank would eventually open two additional branches, but its hub remained at 3412 Union Blvd., in the Kingsway West neighborhood. "Gateway took local deposits, and made loans in a neighborhood where few other banks focused," Adolphus Pruitt, the president of the NAACP St. Louis City told the St. Louis American in 2012.
That year was the year Gateway Bank closed for good, after serving the community for 47 years. It was already reporting yearly losses before the Great Recession hit, and was placed on an FDIC watch list in 2006. The agency eventually seized Gateway in November 2009 and sold the assets to Central Bank of Kansas City.
The branch remained in operation as Central Bank of St. Louis until October, 2012. A spokesperson for Central Bank said the company could not justify keeping the doors open without enough income coming in.
The physical lack of banks in a neighborhood is part of the struggle of getting the unbanked population to use traditional financial services like checking and savings accounts. While mistrust of the banking sector is one of the largest reasons people remain unbanked, access to the banking sector is another. Being unbanked and being low-income often go hand-in-hand. As for-profit businesses, banks are reluctant to open in areas where they won't be enough assets to cover the cost of doing business.
Enter St. Louis Community Credit Union.
Gateway had about 1,300 customers when it closed for good in 2012. According to the St. Louis American, they were predominately African-American and low-income.
In other words, a perfect fit for the St. Louis Community Credit Union, according to president Kirk Mills.
“When we looked at the map, and looked at some holes where we would like to be, that was an area where we wanted to go,” Mills said.
It's easier for credit unions as non-profit corporations to find a sustainable business model even with lower returns, Mills said. For 70 years, the company has been making it work. Ten of the 11 branches are in distressed or severely impoverished areas of the city, as determined by the U.S. Census.
“A lot of times, folks talk about food deserts. We see financial services deserts," Mills said. "We knew it was important to be located in the community, to try to bring affordable financial services."
By early 2015, the credit union will open a 12th branch - also in an economically distressed area. The company has purchased the site of the old Gateway Bank, and plans to demolish the original building. Mills secured a $500,000 community development block grant to help cover the costs.
While the Gateway Bank building itself will be gone, its legacy of keeping a financial institution in the neighborhood will continue. Mills says the lobby of the new credit union will contain a display about the history of Gateway. After all, both institutions were in the business of doing banking with those who couldn't get the service elsewhere.
Follow Rachel Lippmann on Twitter: @rlippmann